Perhaps no bank in the tri-state area made a bigger statement in the first half than JPMorgan Chase & Co., after it introduced a loan program in June that awards a half-percent lower interest rate for each new employee hired by a small business, while pledging to steer billions of dollars to the sector.
As it turns out, the tone of commercial lending conversations was increasingly positive in the second quarter, according to multiple banks doing business in the area ”“ though in the next breath bankers reiterated that caution abounds.
“Plenty of dialogue is going on between our clients and our bankers as folks get themselves ready to take some actions, but just not yet really manifesting itself in draw-downs on (credit) lines ”¦ or loans going up just yet,” said Jamie Dixon, CEO of JPMorgan Chase, in a July conference call with investment analysts.
Small business loans continued to dominate the attention of policymakers as the first half came to a close. In mid-July, Federal Reserve Gov. Elizabeth Duke addressed the continued problems, herself a former banker with Wachovia Corp. and a community bank in Virginia.
“A number of small businesses are feeling the effects of tightened credit because the value of their collateral has dropped,” Duke said. “Part of the ongoing debate about whether we have a supply or demand problem with small business lending is based on the fact that bankers and small business owners have different ideas about what a creditworthy small business looks like.”
In the Connecticut Business & Industry Association”™s latest credit availability survey published in April, just 10 percent of businesses surveyed described loan availability as good or excellent, while half termed conditions fair at best.
What”™s more, 44 percent of those surveyed said they expected credit conditions to worsen in the coming months.
The National Federation of Small Business (NFIB), meanwhile, said its own index of small business optimism dropped slightly in June after posting modest gains over several months.
Still, 90 percent of small business owners told NFIB that their commercial credit needs were being met, including those that were not seeking a loan.
“We have made some strong strides in the commercial non-mortgage area in particular, both in small business and the middle market,” said Jerry Plush, chief financial officer of Webster Financial, in an investor conference call.
In Bridgeport-based People”™s United Financial Inc.”™s own conference call, the company”™s head of commercial lending noted loans have still been slower to trickle out to the smallest companies, in part due to their own reluctance to take on debt.
“Big business and big names are doing pretty well,” Dreyer said. “Small business, micro business and even ”¦ middle market business ”“ these people are still very worried, very concerned about where the economy is going and where politics are going and where taxes are going; and until they feel more secure, I don”™t think you are going to see demand really pick up in mainstream as they say. Big business, yes; small business, not so much.
“(Commercial and industrial) lending has been pretty brisk, but the utilization rates are lower and until the economy really gets going again, we won”™t get those utilization rates up,” Dreyer added. “We are putting on significant new customers. (In) commercial real estate finance, there have been lots of opportunities and they are really high-quality deals with household names ”¦ (That is) a kind of business that in the past we wouldn”™t necessarily see. We are seeing it now and we are booking it.”
